The leading ecommerce player Alibaba has just inked a $1.25 billion funding for the Chinese food-delivery startup, Ele.me, the two companies confirmed in separate statements on April 13.
Ele.me further provided details of the investment on its Weibo microblog, which states that while Alibaba injected $900 million, the remaining $350 million was provided by its Internet finance arm and sister company, Ant Financial.
This investment is meant to give a direct leg-up to the startup which is struggling to keep up with competition like Meituan-Dianping in the increasingly crowded market. The latter has acquired a sound financial backing of $3.3 billion at a recent financing round held by leading Chinese companies, adding to Ele.me's insecurity that went ahead with Alibaba's promised investment even after raising $1 billion right before that.
Like Ele.me, which roughly means "Hungry Now?" in English, most traditional Chinese food companies are jumping on to the O2O bandwagon, which stands for "online to offline'. The new buzzword in China means that the traditional offline companies will get linked to their customers via smartphone apps meant for taxi hailing and restaurant reviews. As the world gets tech-savvy and increasingly dependent on online apps to organize their lives, the traditional food joints have started to look for investors who would help them keep afloat amid the fiercely competitive O2O market.
By providing the financial backing to Ele.me, Alibaba hopes to cash in on the growing demand for the O2O services as well. However, while the actual collaboration may have happened now, Alibaba's intention of investing into Ele.me was first announced in December 2015 even though the startup had just raised about $1 billion then from investors which also included Alibaba rivals like JD.com and Tencent.
However, neither Ele.me nor Alibaba have provided an insight into the percentage of stake Alibaba and Ant Financial would hold in the food startup in lieu of the investment. But as per the initial agreement in December, Alibaba had reportedly agreed to settle for a 27.7 percent stake.